Circle the one best answer, fill in the blank(s), or work out completely. Show calculations, please.

1. If supply decreases and demand also increases, we can conclude that the new equilibrium:

a. Quantity must increase but market price may fall, stay the same or even increase.

b.Price must fall but market quantity may fall, stay the same or even increase.

c.Price must increase but market quantity may fall, stay the same or even increase.

d.Quantity must decrease but market price may fall, stay the same or even increase.

e.Both market quantity and market price must increase.

f.Market quantity must increase and market price must decrease.

2. On the diagram for question two, circle the letter that correctly completes the following statement: Let D1 and S1 represent the original supply and demand curves. If there has been an increase in both demand and supply, then the new equilibrium point will be _____?

3. One of the following equations represents a supply curve and the other a demand curve.Decide which is which.Circle the answer for question three that is the closest to being correct. The equations are:

Q = 150 - 10P Q = 100 + 5.6P

What will the new equilibrium price be?

3. 3.2 60.0 111.0 118.0 130.0 150.0 (all close, but approximate)

4. Here is a function that is either a demand function or a supply function (but not both):

Q = 2 + 5P

here slope of supply curve remains same but x intercept has changed which shows shift in supply curve.In fact supply curve shifts towards left which indicates supply has decreased

A change occurs so that the following function now represents the situation:

Q = 6 + 5P

This is supply function because there is positive relation between price and quantity

We can conclude that (circle the appropriate conclusion on the answer sheet).

4 a. demand has increased

b. demand has decreased

c. supply has increased

d. supply has decreased

e. quantity supplied has decreased

f. quantity demanded has decreased

g. quantity demanded has increased

h. quantity supplied has increased

5.Here is a demand function: Q = 12 - 4P . circle the choice for its marginal revenue (MR) function.

5. Circle the correct formula for marginal revenue (MR)

1. MR = 2 - .4Q b. MR = 3 - .5Q c. MR = 1.5 - .2Q d. MR = 1 - .333Q

e. MR = 1 - .167Q f. MR = 1.5 - .333Q

6. Circle the choice for the quantity that will maximize total revenue for the function in 5 (above).

6. 1 3 4.5 5 6 7.5

7. Suppose the price elasticity of demand for bread is 2.00. If the price of bread falls by 10%, the quantity demanded will increase by:

7 a.2 percent and total expenditures on bread will rise.

b. 2 percent and total expenditures on bread will fall.

c. 20 percent and total expenditures on bread will rise.

d. 20 percent and total expenditures on bread will fall.

e. 20 percent and total expenditures on bread will be unchanged.

8. Suppose that a 10% increase income causes a 20% increase in demand for good X. The coefficient of the income elasticity of demand is:

8 a. negative and therefore these goods are inferior goods.

b. negative and therefore these goods are complements.

c. positive and therefore these goods are substitutes.

d. positive and therefore these goods are normal goods.

9.The price of a weekly magazine decreases from $1.90 to $1.50. The quantity demanded increases from 100,000 to 200,000 copies. The price elasticity of demand in this range is:

9. 0.39 0.5 .89 1.0 1.75 2.83

10. The income elasticity of demand for a good is 0.5. If demand decreased 5% as a result of a decrease in income, how much must income have declined?

10. 2.5% 8% 10% 15% 25% 40%

11. Demand for X increases from 100 to 125 when the price of Y decreases from $6 to $5.The cross-price elasticity of demand is:

11. -3.67 -1.22 1.22 1.44 3.67 4.33

The multivariate demand function below will be needed for questions 12-18.

Setting: Grapple, Inc. is a leading seller of laptop personal computers. However, they want to become a leading tablet seller, too. Your marketing department, aided by your economics staff, has estimated a function to help you in the quest for market leader in tablets. The variables are defined after the function.

Q_g= 10000 - 25P_g+ 20P_h + 30P_r - 15P_dv - 35P_sc - 10P_mm + 0.05A_g+ 0.03A - 25C + 0.1Y

Q_g = the number of Grapple tablet computers demanded per week.

P_g = the price of each new Grapple tablet (in $).

P_h = the price of each Hewpaq tablet (in $).

P_r = the price of each Ronova tablet.

P_dv = the price to equip a tablet with Holographic digital video (in $, this is an upgrade option that enables three dimensional graphics on a tablet.Two dimensional graphics is standard equipment).

P_sc = the price of various screen sizes (in $, a 8 inch is standard, but upgrade options are 10 inch extra sharp, 12 inch, 12 inch extra sharp, Each also has a touch-screen option. The upgrades get progressively more expensive as the size and capability increases).

P_mm = the price of memory chip upgrades (in $). More 2 Gigabyte (Gb) chips can be added. Of course each added 2 Gb chip costs more. One 2 Gb chip is standard.

Y = average annual disposable income of a typical tablet purchaser (in $).

A_g = average age of a tablet purchaser (in years).

A = average annual Grapple advertising expenditure (in $).

C = number of computer systems the average tablet purchaser already owns.

12.If all variables remain unchanged except the price of Hewpaq (P_h) tablets, which decreases by $50, then the demand for Grapple tablets will:

12a. decrease by 1000

b. decrease by 1250

c. increase by 1000

d. increase by 1250

13.If all variables remain unchanged except the price of Holographic digital video (P_dv), which decreases by $50, then the demand for Grapple tablets will:

13a. decrease by 750

b. decrease by 1500

c. decrease by 1750

d. increase by 750

e. increase by 1500

f. increase by 1750

14.If all variables remain unchanged except the price of memory chips (P_mm), which decreases by $20 per chip, then the demand for Grapple tablets will:

14a. increases by 200

b. decreases by 200

c. increases by 450

d. decreases by 450

e. increases by 700

f. decreases by 700

15.You can tell by the sign preceding the price of Holographic digital video variable (P_dv) that Holographic digital video and Grapple tablets are:

15a. normal goods

b. substitute goods

c. inferior goods

d. complementary goods

In the questions 16-18 use these values in the multivariate demand function for Grapple tablets:

P_g = $500 P_h= $800 P_r = $700 P_dv = $50 P_sc = $100 P_mm = $30 A_g = 40

A = $200,000 C = 2 Y=$30,000

16.After the values above are entered into your demand function, what quantity of Grapple tablets will be demanded?Be very careful with this calculation. This value will be used again below.

16. 19401 28902 31027 35902 38902 40152

17.What is the point cross-price elasticity of demand for Grapple tablets with respect to the above price of screen sizes (P_sc)? Show the values you use in the formula and work out completely. Be sure to show the sign. Does this value indicate a very sensitive (elastic; responsive) relationship (write a one sentence comment)? The formula is:

E =Q_g/P_sc* P_sc/Q_g

17. Work elasticity out in detail, give your calculations below. Next, write a one sentence comment addressing the question asked.

18.What is the point cross-price elasticity of demand for Grapple tablets with respect to the above price of Holographic digital video (P_dv)? Show the values you use in the formula and work out completely. Be sure to show the sign. Does this value indicate a very sensitive (elastic; responsive) relationship (write a one sentence comment)? The formula is:

E = Q_g/P_dv * P_dv/Q_g

18. Work elasticity out in detail, give your calculations below. Next, write a one sentence comment addressing the question asked.

19.Write the first derivative of the following function in the space provided on the answer sheet.

W = 12 + X - X² + 3X³

19. Write your derivative in the space below:

20. Write the first derivative of the following function in the space provided on the answer sheet.

R = 100 + 6S^1/2 - 3S² + 6S^-1/2

20. Write your derivative in the space below: